The unpredictable risk of high cost claims

Statistics show that self-funded plans have a growing risk exposure to high cost claims. Absorbing these large losses can make managing budgets difficult for employers offering self-funded medical plans. The risk of high cost claims challenges employers managing their health care spend and their bottom line.

According to the 2014 Sun Life Financial Stop-Loss Report, SunLife’s catastrophic claims exceeding one million dollars increased from two claimants in 2010 to 22 claimants in 2013. SunLife believes they will continue to see a rise in $1 million claimants due to advances in medical technologies, increases in hospital billed charges and the Accountable Care Act’s removal of lifetime maximums.

SunLife believes they will continue to see a rise in $1 million claimants due to advances in medical technologies…

The 2014 Aegis Risk Medical Stop-Loss Premium Survey reported that:

55% of the respondents experienced a large claim over $500,000

23% of the respondents experienced a large claim over $1.0 million

9% of the respondents experienced a large claim over $1.5 million

Sixteen of the respondents reported at least one known lasered claimant.

SunLife reported that cancer was one of their top high cost medical conditions. According to Kaiser Health News, the price of cancer drugs has doubled over the past decade, with the average brand name drug costing $10,000 for a month’s supply, with some drugs costing as much as $30,000 a month.

According to an Express Scripts Drug Trend Report, specialty pharmacy is expected to have an overall trend of 18% in 2015 and 2016. However, some specific specialty therapeutic classes are expected to trend at a significantly higher rate:

Cancer: 24% trend

Respiratory Conditions: Over 100% trend

Hepatitis C: Over 200% trend

As cost increases continue, employers may be faced with higher volumes of large claims and possibly absorb year over year liability from catastrophic claimants lasered by stop-loss carriers. With the removal of lifetime limits, the potential liability caused by conditions such as premature infants, liveborn complications, transplants or hemophilia increases the risk of an employer’s health plan.

As cost increases continue, employers may be faced with higher volumes of large claims and possibly absorb year over year liability from catastrophic claimants lasered by stop-loss carriers.

Because large claims can be unpredictable, no employer is immune to this increased risk. Even employers with a history of minimal large claims exposure may see a shift one day and come face to face with these challenges. With the unpredictable risk of high cost claimants growing, the question to consider is, “Does Group to Individual (GTI) make sense for your organization?”

ABOUT THE HIXME THINK BLOG: Authored by one of the gurus of health insurance, Denny Weinberg, postings reflect market trends and the powerful emerging movements toward true portability and personal ownership by workers and their families. Postings follow these emerging trends, driven by consumer ownership of retirement benefits, consolidations by health care institutions, and the stated pro-consumerism goals and actions of the administration, federal agencies and Congress.

Hixme CEO, Denny Weinberg is a 35 year veteran executive in healthcare financing and operations. Prior to his 4 years as investor and CEO with Hixme, his broad background includes a 20 year tenure CEO of a number of Anthem's largest operating companies. Denny has managed a portfolio of early stage companies in the Health/Medical arena as well as other industries. He has also served as board member, advisor and consultant to both private equity-backed, and publicly traded Blue Chip companies.